Essential Questions • How does the free enterprise system work? • What factors caused the Industrial Revolution? • How did the Industrial Revolution change the ways people lived? Important Ideas • • • • • • • • • • • Economics: Free Enterprise Adam Smith Britain James Watt Steamboat Railroad Mass Production Karl Marx Laissez-faire capitalism Unification Understanding Economics • Economics: how people meet their needs by making, distributing, and using goods and services • Economists study how people – – – – – Work Earn money save money Invest Use their time, energy and money Why should we study economics? Three Economic Questions • People have unlimited wants • The world has limited resources • How do countries meet the needs of people with limited resources? • Every country must answer these 3 questions: What should be produced? How should it be produced? Who should get it? Free Enterprise System • Characteristics: – People decide what to make, sell, and buy. – People own property and decide how to use it. – Some people invest in private business seeking a profit (money made) – Some people make the same goods and create competition In a free enterprise system what is the responsibility of government, if any? Free Enterprise • Characteristics: – Government interference is limited. – Government sets the rules and settles disputes. – Producers and consumers answer the 3 basic questions, not government. Give an example of a time when government should interfere in the system. The Law of Supply and Demand • Supply= amount of goods produced • Demand= amount of goods wanted • Supply and demand determine price Explain the chart as it relates to supply and demand If demand is low, prices will go down If demand is HIGH, then the price goes up Adam Smith • Scottish professor • Wrote The Wealth of Nations in1776 • Said: – Division of labor helps production – Supply and demand determine price – Only producers with best goods and prices will stay in business – An “invisible hand” guides individual actions for the common good – Attacked mercantilism – Favored laissez-faire Adam Smith The invisible hand theory says that individuals will do what is right for the economy. Do you think this theory works in U.S. free enterprise system? Characteristics of the Industrial Revolution • Economic revolution began in Great Britain • Introduced mass production • Used new sources of energy • Goods were made in factories not in homes (cottage industry) • Steam power and machines were used Coalbrookdale by Night, 1801, by Philipp Jakob Loutherbourg the Younger • Science and technology became closely linked What technological • People moved from rural advancements made the areas to urban to get jobs Industrial Revolution possible? Causes of the Industrial Revolution in Britain • Geographical Advantages: – Many harbors and rivers – Plentiful coal – Island protected from invasion – Close European markets – Well-located for trade Causes of the Industrial Revolution in Britain • Transportation and Communication – Well developed coastal trade, canals, and port towns – Excellent postal service – Daily newspapers – Most powerful navy in the world Why was having a powerful navy helpful to the growth of the Industrial Revolution in Britain? Causes of the Industrial Revolution in Britain • Large Colonial Empire: – Raw materials from all over the world came to Britain – Britain developed advanced financial and commercial skills • Powerful Middle Class: – Promoted free enterprise – Promoted economic improvement – Brought together capital, labor, and new invention What is the connection between free enterprise and the rise of the Industrial Revolution? Causes of the Industrial Revolution in Britain • Agricultural Improvements: – New scientific methods boosted productivity such as enclosing common lands, rotating crops, and careful animal breeding. – Less people were needed to work on farms. How did agriculture affect the revolution? Innovations in Textile Manufacturing • Revolution came to textiles first • Spinning Jenny (1764): allowed large quantities of thread to be made quicker and cheaper • Improved Steam Engine (1769) James Watt’s engine did not have to be placed near a water source. Factories could now be built anywhere. Spinning Jenny Can you name some inventions from previous time periods that made an impact on the economy of a society? Steam Engine The Shift from Home (cottage) to Factory • Domestic System: craftsmen worked at making cloth • Industrial Revolution: craftsmen began making cloth in factories • Benefits of factories: – higher rates of production – cheaper prices – higher demand of goods What might be some of the negative aspects of working in factories? Working Conditions • Factories were unsafe and dangerous • Workers worked long hours with little pay • Women and children also worked in factories. • Children often did dangerous jobs • In hard times workers lost their jobs and had no way to support their family If conditions were so bad, why would people work in the factories? Urbanization • Fewer people were needed to work on farms • People moved to the city to work in factories • Cities became crowded and unsanitary • Factories polluted the air • City governments were unable to meet the needs of all of these new citizens Was the Industrial Revolution good or bad for cities? Changes in Transportation Technology • Steam boat • Steam engine in locomotives in 1820 • Railroads made transportation easier but required coal, iron, and steel, stimulating growth in those industries Capitalism • Characteristics of 19th Century Capitalism – Role of the Entrepreneur: owned the factory, organized managed, and assumed responsibility for the business – Role of the worker: provided labor and received wages – Role of the government: (laissez-faire) did not interfere in relations between workers and business Since government did not interfere with business, how do you think business treated workers? Explain this cartoon How is this cartoon similar to the one from the French Revolution? In the late 1800s the shocking inequalities between the huge fortunes of the nation's "captains of industry" and an ever-growing population of impoverished workers drove Americans to grapple with questions about the rights of workers and employers. This 1883 editorial cartoon mocked the claims that plutocrat businessmen were the protectors of American industries by presenting Cyrus Field, Jay Gould, Cornelius Vanderbilt, and Russell Sage as bloated parasites sitting on bags of "millions," and protective bulwarks resting on the backs industrial workers making only $6 to $11 a week. Library of Congress Family Life in the Industrial Revolution • Families no longer worked together on farms • Men, women, and children worked in factories • Families spent less time together • Families moved to crowded cities • Cities did not have enough fresh water and had sanitation issues • Diseases like cholera and typhus spread through the cities quickly • Later reforms helped improve sanitation, disease control, public education, and working conditions What impact did the Industrial Revolution have on families? Louis Pasteur (1822-1895) • Believed disease was caused by germs • Showed that sanitary measures could improve health (washing hands and boiling instruments before operations) • Developed vaccines to combat anthrax and rabies • Pioneered the heating of liquids to kill germs Reform Movements • Social Reforms: – Banned women and children from working in mines – Limited work day to 10 hours – Improved working conditions – Established work houses for unemployed Why would Parliament and the monarchy favor these types of social reforms? Queen Victoria I favored social reforms and tried to help the poor Child Labor Reform Movements • Municipal Reforms: – Cleaned up cities – Improved drinking water – Introduced sewer systems to help stop the spread of disease – Built street lamps – Increased police forces – Added free public education How does free public education benefit a society? Reform Movements • Worker’s Unions: Workers formed groups that would strike if working conditions and pay did not improve • Many politicians and owners introduced social reforms to win the favor of unions How does a threat of a strike affect business owners? How does a threat of a strike affect workers? Reform Movements • Political Reform: the growing middle class wanted more political power • The Reform Bill of 1832 gave voting rights to much of the middle class and extended representation in Parliament to cities that did not have it • By the late 1800s all adult males could vote Why is the right to vote (suffrage) important to a society? Karl Marx and the Birth of Communism • Marx wrote two books, the Communist Manifesto with Friedrich Engels and Capital • He believed that workers would rise up against owners because they were underpaid and owners made huge profits • He said workers would create a “Communist” society • In communism everything is owned in common • There is no private property or social classes • Cooperation would replace competition Karl Marx (1818-1883) Who would make sure that everything worked as it should in a Communist society? Socialism • Wanted to improve conditions for workers • Wanted government to step in and pass laws to protect workers • Wanted government to own some businesses • Believed that they could improve worker conditions through political parties • Supported free education, low-cost housing, cheap public transportation, and national health care How is Socialism different from Communism? 2nd Industrial Revolution • Late 19th Century- Early 20th Century • Based on improvements in chemical, steel, and petroleum industries and introduction of electricity • Thomas Edison – Phonograph – Motion picture – Light bulb • Alexander Graham Bell – Telephone • Marie Curie – Studied radioactivity – Discovered radium The Impact of Industry on Nationalism • Industrialization strengthened the middle class • Middle class demanded unity • Business leaders wanted to unify national markets • Politicians and journalists channeled worker discontent into nationalism How can business use the idea of Nationalism to their advantage?